startup

Etsy, Crafting a $2 Billion Business

In the thriving world of e-commerce, few companies stand out more than Brooklyn-based, Etsy. By identifying a gap between artists and market, and by recognizing the then hugely underserved crafting community, four freelance engineers were able to build a $2 billion business.

Start with a Need

In the summer of 2005, twenty-five year old Robert Kalin was looking for a marketplace to sell his handmade wood-encased computers. What he discovered was the market didn’t exist. So, he approached friends Chris Maguire, Jared Tarbell, and Haim Shoppik to help create one. Two months later, in June of 2005, after raising $400,000 in angel funding, Etsy.com went live.

Founded in the artistic heart of Brooklyn’s Dumbo neighborhood, Kalin and his team began to attend artisan fairs to spread the word of the new marketplace. The website soon proved perfect for many crafters who found setting up their own websites too challenging. As the positive word of mouth spread, it soon became apparent that crafters were very willing to buy from one another. The new company was perfectly positioned to thrive.

Growth Challenges

Just two years after launching, Etsy boasted some 450,000 users, and had secured $3 million in venture funding. In 2008, Etsy saw 650,000 active users, and secured another $27 million investment, this time led by Union Square Ventures, Hubert Burda Media, and new investor Jim Breyers of Accel Partners. According to Kalin, during that time Etsy was generating enough revenue after expenses to break even. However, aside from impressive expansion and the new investment, Etsy was still competing in a tremendously difficult market segment. For one, the direct competition were industry titans Amazon, Ebay, and Google. According to Kalin, this new investment positioned Etsy to compete with these titans of e-commerce, allowing the company continued to expand globally. Along with this advantage, Kalin also pointed out that the new infusion of funding would allow the company to survive any future economic downturn – a justifiable statement considering this was 2008 and the country was headed even deeper into the intensifying financial crisis.

Going Public

Throughout it all, the appeal of a marketplace for handmade, homemade, and vintage goods remained strong. Over the next seven years, both Etsy’s community and reach continued to expand. Then in March of 2015, in an effort to support its ever-increasing financial demands, Etsy announced it had filed for a $100 million IPO. When Etsy went public on April 16, 2015, the company was valued at $1.8 billion and raised $237 million in IPO proceeds.

From the start, Kalin and the team viewed building the company as embodying the same handmade spirit as the products they sold. The team personally designed the site, wrote the code, and assembled the servers to get the company up to speed. And their approach proved tremendously successful.

Going Forward

Today, Etsy says it has some 1.9 million active sellers, 37.5 million active buyers, and in 2016 alone, saw $2.84 billion in gross merchandise sales. This is all good news for the ever increasing number of sellers who make their living off of Etsy. According to Etsy, a full one-third of US based sellers make enough off their proceeds to serve as a primary source of income.

By providing a platform for buyers and sellers to connect over a shared interest, Etsy has built a marketplace positioned to remain relevant in its community for many years to come.